Age and experience give Ed Zander, the former president of Sun Microsystems, a unique overview of the state of IT.

Now managing partner for Silver Lake, a firm specialising in restructuring troubled technology companies, Zander is both optimistic about the future of the industry he helped pioneer and blunt about the problems users and suppliers face.

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In a special interview he pulled no punches about what has gone wrong. "The whole industry is saturated, with too many people, too much technology, too many companies," the former Sun chief admitted.

"We haven't provided end-users with a measurable ROI or a return on assets. We've saturated them with equipment and software and made it all too complex."

As IT struggles to cope with the downturn, Zander warned that fundamental changes were afoot.

"Some people think it's just a natural economic downturn, but it's more than that. The bigger companies will be facing some interesting strategy alternatives. We'll be seeing more structural changes along the lines of the HP/Compaq merger."

Such mergers, he said, would be driven by competition and forever tighter corporate IT budgets. Companies that will survive, he said, will be able to demonstrate to IT professionals and CIOs ways reduce their IT costs.

"There's a significant backlog of applications, but budgets are frozen or reduced, and people are stuck with an IT infrastructure that's way too expensive. Capital costs are not allowing them to develop for the next phase of their business," said Zander.

"We've got to figure out new ways to help customers get competitive and to drive their companies to win in the marketplace. The business [is] tired of hearing about technology. The company that gives them an IT advantage to design cars more quickly, or reduce supply chain costs, is what matters. They're not interested in hearing about 48-way servers."

Zander is convinced that both full-scale outsourcing and the development of on-demand utility computing will grow.

"The smart CIOs, who want to keep and run their own infrastructures, have to prove they can run a cost-effective, on-demand utility model in their own companies," he said. "They have to reduce costs considerably and develop measurable ROI applications only."

Other organisations, such as JP Morgan and American Express, he said, have decided that running their own infrastructure is too complex. "They'd rather have IBM or EDS or HP run their data centre for them, and pay as they go. They focus their technology people on really developing the applications that allow them to compete."

Enterprise IT users hoping Zander would predict the "next big thing" will be disappointed. "There's nothing like the net or PCs coming in the near future," he said. "It's going to be more about rationalisation, consolidation and making sense of what people already have.

Innovation will drive new economies, and companies will improve efficiencies and reduce their costs through IT, said Zander, but he predicted most change would be in the consumer, not corporate arena.

"When I think about our industry, I think about consumers and content a lot. Look at what Steve Jobs did with the online music purchase deal. We're beginning to see companies like Apple and Dell and, potentially, IBM and Microsoft doing these kinds of industry crossovers. So in addition to new companies in the future, we'll see the established guard thinking out of the box."

Ed Zander worked at Sun for 15 years, leaving last July, he is now a managing partner at Silver Lake, a firm specialising in consolidations and restructuring deals for troubled technology companies.

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